The owner of Boots the Chemist is abandoning the sale of Britain’s biggest high street pharmacy chain amid torrid conditions in debt-financing markets.
Sky News can exclusively reveal that Walgreens Boots Alliance (WBA) has decided to retain ownership of Boots after an auction process lasting for several months.
The move, which could be announced as soon as Thursday when WBA is due to announce financial results to the New York Stock Exchange, is likely to cast doubt over Boots' long-term prosperity under WBA's ownership.
Banking sources said on Tuesday that the £5.5bn auction had faltered badly in recent weeks, with the only bidder to make a binding offer for Boots - a consortium of Apollo Global Management and Reliance Industries - pinning its hopes on the steadfastness of a quartet of lenders.
Growing concerns about the global economy have triggered severe doubts among the big banks which help finance leveraged buyouts, with Boots among the biggest such deals in Europe.
Apollo and the Indian behemoth Reliance Industries had lined up Royal Bank of Canada, Credit Suisse, Santander and Bank of America to help finance a large chunk of the £5bn-plus acquisition.
Because of the difficulty bidders were having financing a deal, WBA was prepared to retain a significant minority stake in Boots in order to get the deal through.
Another prospective bid from the owners of Asda - Mohsin and Zuber Issa and TDR Capital - had looked even more uncertain.
WBA, which is being advised by Goldman Sachs, decided late last year that the UK pharmacy chain is no longer core as it refocuses on its domestic operations.
Among the other challenges facing bidders was finding an adequate solution for Boots' £8bn pension scheme - one of the largest private retirement funds in the UK.
Sky News revealed earlier this year that an apparent early frontrunner in the Boots auction - a joint bid from Bain Capital and CVC Capital Partners - had decided not to proceed amid scepticism over the price tag of up to £6bn.
Like many retailers, Boots had a turbulent pandemic, announcing 4000 job cuts in 2020 as a consequence of a restructuring of its Nottingham head office and store management teams.
It has also been embroiled in rows with landlords about delayed rent payments.
Shortly before the pandemic, Boots earmarked about 200 of its UK stores for closure, a reflection of changing shopping habits.
Boots' heritage dates back to John Boot opening a herbal remedies store in Nottingham in 1849.
It opened its 1000th UK store in 1933.
For Stefano Pessina, the WBA chairman, a decision to sell Boots outright would have marked the final chapter of his involvement with one of Britain's best-known companies.
The Italian octogenarian engineered the merger of Boots and Alliance Unichem, a drug wholesaler, in 2006, with the buyout firm KKR acquiring the combined group in an £11bn deal the following year.
In 2012, Walgreens acquired a 45% stake in Alliance Boots, completing its buyout of the business two years later.